Understanding Bonus Eligibility: What Are the Minimum and Maximum Cut-Offs for Employees?

Dear Seniors, I am looking for information regarding the minimum and maximum eligibility (cut-off) for bonuses for employees. What are the conditions for bonus eligibility? Please help me find solutions to this matter.

Thank you,

Regards, GKS

As per my knowledge, the earlier minimum cutoff for the Bonus Payable to any employee was Rs. 3,500/-. But as of today, may I know whether any new slab has been defined since we are running short of funds?

Bonus Eligibility:

- (a) Must work a minimum of 30 days in the financial year.
- (b) Salary should be Rs. 10,000 or less.
- (c) The bonus must be calculated on the actual salary or a maximum of Rs. 3,500 per month (i.e., if the salary is above Rs. 3,500, then Rs. 3,500 must be taken into account for calculating the bonus amount).
- (d) In the case of a worker, the bonus can be calculated based on the number of days worked by the workmen.

Minimum and Maximum Bonus:

- Minimum bonus: 8.33% (Rs. 3,500) and Maximum bonus: 20% (Rs. 8,400).

Bonuses should be paid within 8 months during the next financial year (i.e., for the year 2010-11, the bonus must be paid on or before 30 November 2011).

I hope I have cleared your doubts. In case of any further doubts, please do not hesitate to raise your queries.

Our company is a limited company, and two contractors are appointed for labor supply. Please tell me if the applicable bonus for casual employees of contractors is yes or no.

Thanks,
Khaladkar R G

The contractor casual employees never work continuously for long durations; they will leave the company after working for 1 or 2 months. Even if bonus payments are made, they may not reach the concerned worker as they cannot be traced once they leave the organization. Hence, companies typically do not provide bonus payments for casual workers. However, company contractors are obligated to provide payment to casual workers, and any bonuses not received by the workers should be deposited with the Labor Commissioner's Office at the end of the financial year. If a worker approaches the Labor Office, the bonus amount held in their name will be released by the Labor Office after confirmation from the relevant authorities.

Kind regards

I wanted to ask my question with an example. Let's say a laborer joins on the 15th of October with a pay of Rs. 10,000 per month and works for two months, leaving on the 15th of December. Do I have to pay him a bonus? If yes, then how much should I pay him as a bonus, and how do I calculate it?

Please clarify...

Normally, for the labour force, we calculate the bonus on a prorated basis. That is, Rs. 3500/total number of working days x number of days worked during the month for October, November, and December is the total basic wages. Then, find out 8.33%. After that, you can make the entry in Form C (Bonus Register) and prepare a voucher accordingly. Subsequently, make the payment along with the Final Settlement. You can endorse with red ink in his service certificate issued to him as Bonus for the FY 2011-12 is paid on _______ date along with F&F Settlement.

I am having a little bit of doubt about the line mentioned by you, which is "Minimum 8.33% (Rs.3500) and Maximum 20% (Rs.8400)." As it has been mentioned that the bonus would be given only in the case when the employee's salary is a maximum of Rs.10000 (Basic+HRA), but the slab would be taken as Rs.3500. This means that if the salary of the employee is 10000, in that case, his bonus would still be calculated on Rs.3500. The minimum bonus would be 8.33%, while the maximum would be 20% of Rs.3500.

I need to know the meaning of the point "Maximum 20% (Rs.8400)" because if the bonus is given at 20%, then it would be 20% of 3500, which would be 700. So, I request everyone to please clarify this point.

Warm Regards,
Shweta Singh

Dear Ankurchi,

Normally, for the labour force, we calculate the bonus on a pro-rata basis. That is, Rs. 3500 divided by the total number of working days, multiplied by the number of days worked during the month for October, November, and December, gives the total basic wages. Then, find out 8.33%. You can then make the entry in Form C (Bonus Register) and prepare a voucher accordingly, making the payment along with the final settlement. You can endorse with red ink in his service certificate issued to him, noting that the bonus for the FY 2011-12 is paid on _______ date along with the F&F Settlement.

Thanks a lot, Sir, your reply clarified all my doubts. This will help me a lot. However, during the calculation, I got a bit confused. I calculated it as follows: Number of working days - 53, Number of days worked - 50. The labour's pay annually - Rs. 10,000 * 12 = Rs. 120,000/-. Then I got 8.33% of Rs. 120,000 = Rs. 9,996/-. On which again I did a calculation - (9996/53) * 50 = Rs. 9,430/-. Is Rs. 9,430/- his bonus? Or should I calculate keeping the minimum bonus only as follows: (3500/53) * 50 = Rs. 3,301. Which one is correct? Please correct me wherever I am wrong.

Regards

Ms. Shweta, the calculation is as follows: If a laborer has a monthly salary of Rs. 3500, then his annual salary will be 3500*12 = Rs. 42000. Now, if you calculate 8.33% of 42000, you will get Rs. 3498.60 (which is almost 3500), and 20% of 42000 is 8400.

Hope this clarifies your doubt.

Regards, Ankur

S. Bhasker clearly explained the bonus calculation process and eligibility criteria.

Regards,
Sharad Choudhary

Dear Mr. Khaladkar,

As per the Payment of Bonus Act, as a principal employer, you are liable to pay the minimum bonus applicable for all eligible employees.

Jagadeeshwara
Sr. Manager HR
HHV

If the company is not paying a bonus, what should we do in that case?

Regards,
Vipin Bansal

Bonus Calculation Method Inquiry

In one company, the bonus is calculated based on the Net Salary. For example, if the net salary is $15,000, then the bonus would be calculated as $15,000 * 8.33% * the number of months worked.

Is this calculation method acceptable?

Thanks and Regards,
Trupti

Bonus Payment in Loss-Making Companies

If a private sector company is running at a loss, is it necessary to pay bonuses to employees? If it is necessary and the company management states that they are incurring losses and are unable to pay bonuses this Diwali, what should employees do?

Regards,
Vipin Bansal

As per the Payment of Bonus Act, employees whose salaries or wages are up to ₹10,000 per month and have worked for 30 working days in the financial year are eligible for a minimum bonus as follows: 3500 x 8.33% = ₹292 per month. Any amount paid beyond this by the employer will be considered as Ex-Gratia.

Bonus Payment Requirements

Once an organization comes under the purview of the Payment of Bonus Act, regardless of whether the company is in a loss or gain, it must pay a minimum bonus to the eligible employees within 8 months upon the completion of the accounting year, i.e., by 30.11.

Regards,
JAGADEESHWARA

Earlier, the bonus had to be paid when the company earned an allocable surplus fund. Nowadays, the same clause has been amended, and the policy has changed. Whether the organization has an allocable surplus or not, it must pay a minimum of 8.33% (i.e., Rs.3499/-) as a bonus to all the workers/employees.

Regards

Yes, Seepa. All companies are required to pay a bonus to all employees engaged by them whose salary is less than Rs. 10,000. Nowadays, companies are opting to compensate their employees with Performance Linked Rewards (PLR) instead of a bonus. This change is beneficial as employees will take pride in earning the PLR rather than simply receiving it from the company. Additionally, the PLR serves as a motivating factor for employees to enhance their productivity and efficiency.

Can you please tell me the calculation for the bonus? For example, if the basic salary is $5000 and the slab is $3500 x 12 months x 8.33%: = $3498/-

However, if he worked less than expected, how should we calculate his bonus?

Please calculate it on a month-wise basis, then total it to find out the annual bonus amount.

Rs. 3500 / (Number of working days in the month) * Number of days worked by the worker = Eligible Basic Pay for calculating the Bonus.

Add all the months he worked Basic Pay and then multiply it by the Percentage of Bonus declared by your company.

Hope you have understood the calculation method. Wish you all the best.

Regards.